Global Fundamental Analysis 09/05/2022

Global Fundamental Analysis 09/05/2022, FP Markets

Opening Call: The Australian share market is to open higher.


U.S. stocks fell, extending losses a day after one of the worst declines for equities since the pandemic started. The yield on the 10-year Treasury climbed to 3.15% after settling at its highest level since November 2018. The WSJ Dollar Index advanced to 96.07. Oil prices reached a six-year high amid ongoing concerns around Russian crude and product exports. Gold edged higher, but posted a weekly decline.


Australian Market

Australia’s S&P/ASX 200 lost 2.2%, as the benchmark index matched its biggest weekly loss since October 2020. All 11 ASX 200 sectors finished lower to round out a 3.1% weekly fall. The tech sector tumbled 4.6% as shares of all 16 sector components finished in the red. The heavyweight financial and materials sectors both lost 2.0%. It was the ASX 200’s third consecutive weekly loss.


US Market 

The S&P 500 continued a weekslong selloff that has dragged it to its worst losing streak in more than a decade. Stocks have swung wildly in recent sessions as investors have tried to gauge what impact the Federal Reserve’s plan to raise interest rates will have on the economy. Many investors find themselves caught between competing hopes: that rate increases will be significant enough to tame rapidly rising inflation, but not so large that they will derail economic growth.  

These worries, alongside rapidly rising yields in the government bond market, have hit shares of technology and growth stocks especially hard, dragging the S&P 500’s tech sector toward its longest stretch of losses in a decade as investors have re-evaluated the once-highflying group. Though rising rates have rippled through the stock market for much of the year, the selling has taken on fresh intensity in recent days. Stocks have recorded some of their worst drops since 2020, deepening their losses from April.

Investors are now grappling with an extended selloff that bears little resemblance to the historically short and severe stock-market crash of March 2020. The S&P 500 shed 0.6%, capping off a sixth straight week of losses, the longest streak since June 2011. The technology-heavy Nasdaq Composite lost 1.4%. The Dow Jones Industrial Average gave back 0.3%, a day after its worst session since 2020.



Gold prices closed higher, as investors absorbed fresh data showing stronger-than-expected U.S. employment data, but swept to a third straight week of declines. June gold futures added to gains after the jobs data, then pared those back. The contract rose 0.4% to settle at $1,882.80 per ounce. Still, the precious metal lost 1.5% for the week, booking a third straight week of declines.

 “We do expect more investment demand from gold this year,” said Robert Minter, director of ETF investment strategy at abrdn. He pointed to markets having trouble parsing what the new interest rate regime looks like as central bankers work to cool inflation. “Clearly, there will be higher interest rates,” Minter said. “Clearly, there will be higher inflation. The question is, are you looking at dramatically higher interest rates.”


Oil Futures

Oil futures ended higher, posting a strong weekly gain, as the European Union made progress toward a ban on imports of Russian crude and gasoline futures surged to a record. The EU earlier this week proposed a phaseout of imports of Russian energy that would take effect within six months. The plan, which must be approved by all 27 members, still faces hurdles, with Hungary demanding more time and EU money to smooth the transition, according to The Wall Street Journal.

“Crude prices just want to head higher as energy traders completely fixate over the looming European sanctions on Russian oil. No one wants to be on the wrong side of a major crude supply disruption headline, so whatever oil price dips that happen will be short-lived,” said Edward Moya, senior market analyst at Oanda, in a note. West Texas Intermediate crude for June delivery rose 1.4% to close at $109.77 a barrel on the New York Mercantile Exchange, for a 4.9% weekly gain. July Brent crude, the global benchmark advanced 1.3% to end at $112.39 a barrel on ICE Futures Europe, up 4.9% for the week.



Major currencies were mixed against the US dollar in European and US trade. The Euro rose from near US$1.0485 to US$1.0595 and was near US$1.0550 at the US close. The Aussie dollar fell from US71.30 cents to US70.60 cents and was at US70.77 cents at the US close. And the Japanese yen held between 130.21 yen per US dollar and JPY130.69 and was at JPY130.55 at the US close.


European Markets

European sharemarkets were weaker on Friday. Technology shares fell 2.8% and retailers lost 2% but oil and gas rose 0.5%. Shares in Adidas fell by 3.6% after lowering sales expectations for 2022. And shares in Dutch bank, ING lost 4.7% in response to worse-than-expected quarterly income. The pan-European STOXX 600 index fell by 1.9% and fell 4.5% over the week – the biggest weekly decline in 2 months. The German Dax lost 1.6% and the UK FTSE fell by 1.5%. In London trade shares in Rio Tinto fell by 0.7% and shares in BHP fell by 0.1%.


Asian Markets

Earlier Friday, Chinese stocks ended the session lower. The benchmark Shanghai Composite Index fell 2.2%, while the Shenzhen Composite Index dropped 1.7%. The ChiNext Price Index slid 1.9%. Tourism-related companies, including travel agencies, attraction-site operators, airlines and airports, led the losses, after Beijing signaled its intention to stick to its zero-Covid policy.

Hong Kong stocks also ended the session lower. The benchmark Hang Seng Index fell 3.8%, marking its largest one-day decline in two months. Consumer-goods companies led losses amid rising worries over China’s consumption downturn amid Beijing’s continuing zero-Covid policy. Japanese stocks, however, were led higher by gains in energy and power stocks as hopes grew for nuclear-reactor restarts amid climbing oil prices. The Nikkei Stock Average rose 0.7%.

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